Public Consultation Document New Franchise for The Star

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Public Consultation Document

New Franchise for

The “Star” Ferry Company, Limited

Purpose

The existing franchise of the two ferry routes operated by The

“Star” Ferry Company, Limited (“the Star Ferry”) (i.e. “Central – Tsim

Sha Tsui” and “Wan Chai – Tsim Sha Tsui” routes) will expire by 31

March 2018. The Government plans to engage Star Ferry for discussion

on the arrangements for the new franchise of the two routes. Members

of the public are welcome to provide views on matters to be covered

under the new franchise.

Background

2. It is the Government’s established policy that public transport

services should be run by the private sector in accordance with

commercial principles to enhance efficiency and cost-effectiveness. The

“Star” Ferry Company, Limited which runs the “Central – Tsim Sha

Tsui” and “Wan Chai – Tsim Sha Tsui” routes was established in 1898;

the two routes have been in operation since 1898 and 1988 respectively,

providing convenient cross-harbour service to citizens at a low fare.

3. In tandem with the commissioning of the three cross-harbour

tunnels over the years1 and the continuous expansion of the railway

network, the cross-harbour public transport network has become more

comprehensive nowadays. Among the various public transport modes

providing cross-harbour services, Star Ferry’s fares are the lowest2.

Currently, it costs an adult $9.7 to travel between Central/Wan Chai and

Tsim Sha Tsui by MTR with Octopus Card. If the same cross-harbour

journey is made on franchised bus services, the cost ranges from $8.4-9.3.

1 The Cross Harbour Tunnel, Eastern Harbour Crossing and Western Harbour Crossing was opened in

1972, 1989 and 1997 respectively.

2 The Government is processing Star Ferry’s latest application for fare increases. The proposed rate

of fare increases is around 25.2%. The Government is handling the application according to the

established mechanism. For details, please refer to Legislative Council Paper No.

CB(4)578/16-17(07). The Legislative Council document can be downloaded from the website

below:

http://www.legco.gov.hk/yr16-17/english/panels/tp/agenda/tp20170224.htm


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By comparison, for Star Ferry, the lowest single journey adult fare is $23

while the highest single journey adult fare is $3.44. In addition, Star

Ferry has already been running ferry services for over a century. It has

its unique historical significance and has always been well received by

the community and visitors. However, since the relocation of the Wan

Chai Pier to the current location in end August 2014, Star Ferry’s

patronage has declined. The average daily patronage of the two routes

in 2016 was around 53 400 passenger trips in total, which was around

10% lower than that in 2013 (59 200 passenger trips). However,

according to Star Ferry’s forecast, the patronage will become more stable

in 2017.

4. Star Ferry’s current franchise commenced on 1 April 2008 for a

period of 10 years and will expire on 31 March 2018. In accordance

with the requirement as set out in the Ferry Services Ordinance (“the

Ordinance” (Cap 104)5, the Star Ferry submitted to the Government in

January 2016 an application for extension of its franchise upon its expiry.

5. Under the Ordinance, the Executive Council may grant a

franchise conferring the right to operate a ferry services to any company.

The initial period of the franchise should not exceed 15 years. The

Executive Council may, at the request of the grantee, extend the franchise

for a period or periods not exceeding 15 years, if it is satisfied that the

grantee is capable of maintaining a proper and efficient ferry service and

it is in the public interest to continue the franchised service. The

Ordinance also provides that a grantee shall at all times during the

franchise period maintain to the satisfaction of the Commissioner for

Transport a proper and efficient ferry service. The Government’s key

consideration in granting a ferry franchise to a ferry service operator is

whether the operator is capable of providing a proper and efficient ferry

service.

6. To assess whether Star Ferry has been providing proper and

efficient ferry services, the Transport Department (“TD”) regularly

reviews Star Ferry’s service performance through site surveys,

examination of regular returns by the company and collection of public

feedback. The assessment on the performance of Star Ferry is set out in

3 Weekday lower deck fare for “Central – Tsim Sha Tsui” route.

4 Holiday upper deck fare for “Central – Tsim Sha Tsui” route and holiday fare for “Wan Chai – Tsim

Sha Tsui” route.

5 According to the Ferry Services Ordinance (Cap. 104), the grantee may make a request for extension

of its franchise not less than two years before the expiration of the franchise period.

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paragraphs 7 to 13 below.

Assessment

(A) Service Performance

7. Star Ferry’s two franchised ferry routes provide regular services

on a daily basis, with ferries of the “Central — Tsim Sha Tsui” route

running at intervals of 6 to 12 minutes from 6:30 a.m. until 11:30 p.m.,

and ferries of the “Wan Chai — Tsim Sha Tsui” route running at intervals

of 8 to 20 minutes from 7:30 a.m. until 11:00 p.m. Star Ferry deploys a

total of eight ferries to run these two routes.

8. According to the results of TD’s survey on the two ferry routes

conducted in November 2016, Star Ferry’s adherence rate to the Schedule

of Services in provision of service stood at 96% for over 900 trips on the

day of survey. The remaining 4% trips were slightly delayed by a range

of one to five minutes. Generally speaking, the ferry departure time will

depend on factors such as the number of passengers, weather and sea

surface conditions. Besides, TD commissioned a consultant to conduct

a passenger opinion survey on Star Ferry’s service standard on board in

September 2016. Among the 518 respondents interviewed, 99% were

satisfied with the overall quality of ferry service provided by Star Ferry.

Details are set out at Annex A.

9. In fact, during the current franchise period, Star Ferry has been

implementing various measures to further improve its service.

Examples of such measures include:

(a) investing around $4.9 million in 2012 to replace the

air-conditioning systems on two vessels;

(b) investing around $150,000 in 2016 to upgrade the facilities

at piers. These include providing ramps at all piers to

connect with ferries’ gangways to facilitate the

embarkation/disembarkation of wheelchair users, replacing

the seats at the Tsim Sha Tsui Pier with new ones for waiting

passengers and replacing fluorescent tubes with more

efficient and energy-saving ones. Besides, Star Ferry plans

to replace the turnstiles at the Tsim Sha Tsui Pier with wider

ones later this year; and

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(c) apart from the existing practice of disseminating service

information to passengers at the piers and on the Internet,

Star Ferry launched a mobile application in 2016 ,

strengthening its efforts in updating passengers with the

latest sailing information, including service arrangements

during typhoons and festive occasions.

10. On environmental protection and sustainability, Star Ferry has

been working with the University of Hong Kong since 2012 to develop a

device, known as seawater scrubber, to reduce air pollutants from the

exhaust gas of ferry engines. In 2012, Star Ferry invested some

$1.3 million to install, on a trial basis, the device on a ferry serving the

franchised route. Results of the trial running from 2012 to 2014

indicated that the device could effectively reduce sulphur dioxide by

around 90%. Star Ferry plans to invest $2.5 million per annum in

installing such water scrubbers on five ferries over the next five years, i.e.

from 2017 to 2021. Separately, Star Ferry is going to explore the

adoption of diesel-electric propulsion system for its existing ferry fleets

with a view to reducing the emission of dark smoke, sulphur dioxide and

hydrocarbons. To this end, Star Ferry is conducting trials on its ferry

serving the non-franchised routes. The trial is expected to be completed

within 2017. If found technically feasible under the trial and its

financial situation allows, Star Ferry will consider whether it could adopt

the diesel-electric propulsion system for its franchised ferry fleet.

11. In any case, in response to the passenger opinion survey as

mentioned in paragraph 8 above, Star Ferry will explore the need to

further enhance its service and facilities.

12. Complaint figures concerning Star Ferry are small. From the

commencement of the current franchise in 2008 and till 2016, TD

received on average 22 complaints against Star Ferry annually6. The

number of complaints for 2016 is 19, accounting for 0.07% of the

complaints against public transport services. As regards safety, the

number of accidents involving Star Ferry remains at a consistently low

level throughout the current franchise period. From 2008 to 2016, the

average number of incidents recorded by the company is four cases per

year, with an average of one case per year involving minor injuries on

passengers.

6 This included the complaints referred to TD for follow-up action by the Transport Complaints Unit

of the Transport Advisory Committee.

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(B) Financial performance

13. As mentioned above, since the relocation of the Wan Chai Pier

in August 2014, Star Ferry’s patronage has declined, leading to a

reduction in total patronage of 10% in 2016 when comparing with that in

2013. However, according to Star Ferry’s forecast, the patronage will

become more stable in 2017. At the same time, Star Ferry’s operating

costs have been increasing. In this regard, Star Ferry has been taking a

number of cost saving measures including optimising the locations of the

entrance turnstiles and automating the manual change arrangement by

vending machines to reduce reliance on manpower, replacing the DC

power-generation system of vessels to AC power-generation system to

save maintenance expenses, as well as rationalising the fleet deployment

to save manpower. To help maintain the financial viability of ferry

services, the Government has also been implementing various measures,

including allowing Star Ferry to sub-let premises at piers for commercial

and retail activities, to generate non-fare box revenue for

cross-subsidising the ferry operation7. Other measures to help reduce

the operating costs of ferry services include taking over the responsibility

of pier maintenance by the Government, waiving fuel duty, as well as

reimbursing pier rental and exempting vessel licence fees under the

Elderly Concessionary Fares Scheme. Details are at Annex B. During

the current franchise period, the average yearly profit margin of Star

Ferry is around 4.1%. Details are at Annex C.

14. Star Ferry submitted an application for fare increases with a rate

of around 25.2%. The Government is handling the application

according to the established mechanism. For details, please refer to

Legislative Council Paper No. CB(4)578/16-17(07)8.

Expiry of franchise

15. Based on the analysis in paragraphs 7 to 13, overall speaking,

Star Ferry has been providing proper and efficient ferry service to the

public. As mentioned in paragraph 4, Star Ferry submitted to the

Government an application for extension of franchise. The Government

plans to engage Star Ferry for discussion on the arrangements for the new

7 In 2016, rental income (around $28.94 million) accounted for around 32.1% of Star Ferry’s total

revenue.

8 The Legislative Council document can be downloaded from the website below:



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franchise of its two franchised ferry routes. The Government would

strive for the most favourable franchise terms for the public as far as

possible in a pragmatic manner. We aim to conclude the discussion

within 2017.

Public consultation

16. We welcome views from members of the public on the matters

to be covered under the new franchise for the Star Ferry. Such views

may be submitted to the TD in writing on or before 22 April 2017:

By Post: Management and Paratransit Branch

Transport Department

Room 4036, 40/F, Immigration Tower,

7 Gloucester Road,

Wanchai, Hong Kong

By Fax: 2824 2176

By Email: [email protected]

Please mark “Arrangements of Star Ferry’s franchise” on the envelope or

in the submission. Please call 2804 2600 for any enquiries on this

document.

17. Any person/organisation making a submission may provide

personal data on a voluntary basis. Such personal data will only be used

for this consultation exercise. Unless otherwise specified, the name of

the person/organisation making the submission as well as the views so

provided may be made available to the public after the consultation

period.

Transport and Housing Bureau

Transport Department

February 2017

mailto:[email protected]

The Public Opinion Survey for

the Ferry Services of

the ''Star'' Ferry Company Limited

Executive Summary

Aristo Market Research & Consulting Company Limited

November 2016

Annex A

The Public Opinion Survey for the Ferry Services of the

“Star” Ferry Company Limited

1 November 2016

1. Background & Objective

In order to collect public views on the performance of the “Star” Ferry Company, Limited

(“Star Ferry”) as perceived by passengers, the Transport Department (“TD”) has commissioned

Aristo Market Research & Consulting Company Limited to conduct a Public Opinion Survey

for Star Ferry in September 2016.

2. The Survey

The respondents of the Survey covered passengers aged 12 or above who took Star Ferry

service of Tsim Sha Tsui – Central (“Central Route”) or Tsim Sha Tsui – Wan Chai (“Wan

Chai Route”) and was capable of speaking Cantonese, Putonghua or English.

Face-to-face interviews on board of Star Ferry’s vessels were employed to obtain public

opinion on Star Ferry’s performance. To select a random and representative sample of

passengers of Star Ferry on board, a two-stage random selection approach was employed via

sampling of trips and sampling of passengers on selected trips. The sampled trips covered all

operating hours of the survey period. The representative sample of passengers was then

selected randomly from each sampled ferry trip for interviews.

The questionnaire includes 9 core questions covering the following aspects of the service

performance:

1) Overall satisfaction on the services provided

2) Frequency of ferry services

3) Reliability of frequency of ferry services

4) Comfort of ferry

5) Fare of ferry services

6) Facilities on board

7) Facilities at the pier

8) Passenger information

9) Staff performance and attitude

The respondents were asked to rate their satisfaction level on each service aspect in a scale of

(i) Very satisfied (ii) Satisfied (iii) Dissatisfied (iv) Very dissatisfied (v) No comment

(vi) Refused to answer.

In total, 518 passengers were successfully interviewed during the survey period between 18

and 27 September 2016, representing an overall response rate of 65.9%



2 November 2016

3. Summary Findings

Overall

1. Overall speaking, 99.0% of the respondents indicated that they were very satisfied/satisfied

with the overall quality of ferry service provided by Star Ferry. The percentage was much

higher than the 1.0% who were dissatisfied/very dissatisfied.

2. 91.9% of the respondents indicated that they were very satisfied/satisfied with the

frequency of ferry services. The percentage was much higher than the 5.6% who were

dissatisfied/very dissatisfied.


reliability of frequency of ferry services. The percentage was much higher than the 3.7%

who were dissatisfied/very dissatisfied.

4. 93.2% of the respondents indicated that they were very satisfied/satisfied with the comfort

of ferry. The percentage was much higher than the 4.1% who were dissatisfied/very

dissatisfied.

5. 95.6% of the respondents indicated that they were very satisfied/satisfied with the fare of

ferry services. The percentage was higher than the 3.1% who were dissatisfied/very

dissatisfied.

6. 82.6% of the respondents indicated that they were very satisfied/satisfied with the facilities

on board. The percentage was much higher than the 6.0% who were dissatisfied/very

dissatisfied.


at the pier. The percentage was much higher than the 13.5% who were dissatisfied/very

dissatisfied.


passenger information. The percentage was higher than the 8.1% who were


9. 87.3% of the respondents indicated that they were very satisfied/satisfied with the staff

performance and attitude. The percentage was higher than the 2.5% who were




3 November 2016

Wan Chai Route

1. Specifically for Wan Chai route, 98.1% of the respondents indicated that they were very

satisfied/satisfied with the overall quality of ferry service provided by Star Ferry. The

percentage was much higher than the 1.9% who were dissatisfied/very dissatisfied.









dissatisfied.



dissatisfied.



dissatisfied.



dissatisfied.









4 November 2016

Central Route

1. Specifically for Central route, 99.4% of the respondents indicated that they were very

satisfied/satisfied with the overall quality of ferry service provided by Star Ferry. The

percentage was much higher than the 0.6% who were dissatisfied/very dissatisfied.









dissatisfied.



dissatisfied.



dissatisfied.



dissatisfied.







Annex B

Details of Government’s helping measures

for ferry services (including Star Ferry)1

The Government’s measures to help reduce the operating costs

of ferry services (including Star Ferry) include taking over the

responsibility of pier maintenance, waiving fuel duty, as well as

reimbursing pier rental and exempting vessel licence fees under the

Elderly Concessionary Fares Scheme.

2. Star Ferry has been offering free rides for elderly passengers

aged 65 or above since 1993. The revenue foregone (i.e. the amount of

full adult fare) by Star Ferry in offering free rides can be reimbursed by

the Government, subject to a cap of the lower of the actual revenue

foregone and the sum of pier rentals and vessel licence fees. In this

regard, the amount of Government’s reimbursement to Star Ferry due to

offering of fare concessions to the elderly passengers is around $270,000

per annum while the total revenue foregone by Star Ferry in offering free

rides for the elderly is around $2.6 million (i.e. Star Ferry has been

absorbing most of the revenue foregone in offering free rides for elderly).

In 2012, the number of elderly passengers was around 4 100 passenger

trips per day on average. In 2016, elderly passengers enjoying free rides

has dropped to around 2 600 passenger trips per day on average,

accounting for around 4.9% of Star Ferry’s total daily patronage, of

53 400.

3. Besides, under the Government’s Public Transport Fare

Concession Scheme for the Elderly and Eligible Persons with Disabilities,

Star Ferry is also reimbursed for the difference between fares for persons

with disabilities and $2.

1 According to policy, there is basically no direct subsidy from the Government for public transport

services save for the six major outlying ferry routes. These six routes are “Central – Cheung

Chau”, “Inter-islands” serving Peng Chau, Mui Wo, Chi Ma Wan and Cheung Chau, “Central –

Mui Wo”, “Central – Peng Chau”, “Central – Yung Shue Wan”, “Central – Sok Kwu Wan”. The

Government provides Special Helping Measures (“SHM”) to these routes because for the islands

in question there is basically no alternative to the ferry services as a means of public transport

(only Mui Wo is also linked by an external road network, but its cross-district land-based public

transport services are very limited). Short of SHM, the ferry services will not be commercially

viable without periodic hefty fare increases. The seven in-harbour routes should not be

subsidised as there are a variety of land (and railway) transport alternatives available.

Annex C

Star Ferry’s financial performance

in the current franchise period

Financial

Year

(1 January to

31 December)

Average

Daily

Patronage1

Farebox

Revenue

Rental

Income

Other

Non-

farebox

revenue

Total

Revenue

Total

Operating

Costs

Profit/

Loss

Profit

Margin

($ million)

2008 63 000 41.63 19.94 9.35 70.92 76.41 -5.49 -7.7%

2009 59 500 41.83 18.36 8.42 68.61 72.72 -4.11 -6.0%

2010 57 300 46.38 18.55 11.76 76.69 71.17 +5.52 +7.2%

2011 59 400 48.46 20.02 14.92 83.40 76.78 +6.62 +7.9%

2012 58 900 51.24 20.39 12.50 84.13 78.36 +5.77 +6.9%

2013 59 200 53.93 21.99 25.01 100.93 81.53 +19.402 +19.2%

2014 57 700 52.59 24.34 15.42 92.35 85.63 +6.72 +7.3%

2015 55 300 50.18 25.91 12.75 88.84 86.53 +2.31 +2.6%

2016 53 400 48.66 28.94 12.67 90.27 90.95 -0.68 -0.7%

Change

(Comparison

between 2008

and 2016)

-15.24% +16.89% +45.14% +35.51% +27.28% +19.03% Not

applicable

Not

applicable

Note: 2016 financial figures are subject to external audit

1 Elderly passengers are included in the total patronage.

2 The following factors attributed to the exceptional increase in non-fare box revenue in 2013 –

(i) Star Ferry was given a non-recurrent refund of around $8.7 million of employers’ stake

arising from the closure of a staff provident fund scheme and after clearance and payment

of the staff’s share;

(ii) the Government’s exceptional helping measure in connection with SF's last fare increase in

June 2012, to fully reimburse SF for the total revenue foregone from the offer of free rides

for the elderly for the “Central – Tsim Sha Tsui” ferry service. This amounts to around

$1.0 million in total;

(iii) advertising income (mainly due to an increase in advertising income from the exterior

walls of Tsim Sha Tsui Pier by around $1.1 million, and pier interior walls by around $0.5

million; income from ferry hull advertising by around $0.3 million; and inclusion of ad hoc

advertising income of around $0.3 million); and

(iv) increase in shop rental income by around $1.6 million.

Documents

Public Consultation Document New Franchise for The Star